Gaepo Woosung 7th Complex: Samsung vs. Daewoo Face Off... A Look at the Project Terms

Information Session for Gaepo Woosung 7th Complex Union Members Scheduled for the 20th
Project Financing: Daewoo 'CD+0.0%', Samsung 'Lowest Rate'
Daewoo Offers Guaranteed Completion, Samsung Proposes Shorter Construction Period

With about a month left before the selection of a contractor for the Gaepo Woosung 7th Complex, Samsung C&T and Daewoo Construction have begun actively appealing to union members to secure their votes.

According to the redevelopment industry on the 17th, the Gaepo Woosung 7th Complex union will hold an information session for union members on the 20th. Both companies participating in the bid have prepared business proposal documents for distribution to union members. The proposals include commitments regarding project financing conditions, relocation loan limits, construction costs, and construction periods.

Mandatory Project Financing Rate: Daewoo 'CD+0.0%' vs. Samsung 'Unlimited Lowest Rate'

The main point of contention in the proposals is the project financing interest rate. Project financing refers to expenditures excluding construction costs, and includes service fees, relocation loans, financial costs, and commissions. Interest in project financing conditions has increased since the announcement of lending regulations. Samsung C&T proposed to provide unlimited project financing for Gaepo Woosung 7th Complex at the lowest possible interest rate. Samsung C&T highlighted that its credit rating is four notches higher than Daewoo Construction's, and calculated total project financing interest at 278 billion won. The company claims its interest rate is 2% lower than its competitor's, resulting in financial costs about 240 billion won less than Daewoo Construction's offer.

However, Samsung C&T did not specify an exact interest rate. A representative from Samsung C&T stated, "We cannot comment on the interest rate that would apply at the time of groundbreaking," and explained, "If selected as the contractor, the interest rate will be determined at the time the contract is signed." The company added, "Due to our strong financial health, we can secure financing at much lower rates than other construction firms."

Daewoo Construction declared it would be responsible for providing mandatory project financing at CD+0.0%. This is even lower than the CD+0.78% rate Samsung C&T proposed for Hannam District 4. Daewoo Construction explained, "This is the interest rate applied to the mandatory project financing approved by the union at the general meeting." The union informed members that the project financing amount is estimated at 400 billion won, and that the CD+0.0% rate will be applied. Daewoo Construction also stated it would fully cover all guarantee fees when obtaining loans for mandatory project financing with a guarantee from the Housing and Urban Guarantee Corporation (HUG). However, Daewoo Construction did not specify the amount of mandatory project financing in its proposal.

Relocation Loans: Samsung 'LTV 150%' vs. Daewoo 'LTV 100%'

With the June 27 lending regulations capping relocation loans at 600 million won, the relocation loan limit has become a key issue in contractor selection. Relocation loans are borrowed from banks using union members' existing assets as collateral and are used for deposits returned when relocating or moving out tenants.

Samsung C&T proposed a relocation loan with a loan-to-value (LTV) ratio of 150%. The company also attached a condition that, based on the union's general meeting resolution, it could provide unlimited project financing. Daewoo Construction proposed a standard relocation loan at the legal LTV limit of 50%, and an additional relocation loan at LTV 50%, for a combined 'LTV 100%'. Instead, Daewoo Construction pledged to provide 1 trillion won in business promotion funds, which could be used for relocation loans for tenants, multi-homeowners, or debtors. This business promotion fund would be provided after contractor selection and a general meeting resolution.

Samsung C&T proposed construction costs of 8,689,000 won per 3.3 square meters, while Daewoo Construction proposed 8,796,000 won. The total construction cost proposed by Daewoo Construction (677.8 billion won) is about 2 billion won higher than Samsung C&T's (675.7 billion won). Total construction cost refers to the net construction cost plus VAT and other expenses. The net construction cost proposed by Daewoo Construction is 619.8 billion won, while Samsung C&T's is 640.7 billion won.

The payment methods for construction costs also differ. Samsung C&T proposed a 'pre-sale payment' method, in which a fixed proportion is paid as soon as pre-sale revenue is generated. Daewoo Construction proposed a 'progress-based payment from pre-sale revenue', in which construction costs are paid according to the progress rate as pre-sale revenue comes in.

Daewoo Emphasizes 'High-End, Guaranteed Completion', Samsung Highlights 'Largest in Gaepo'

Daewoo Construction emphasized that it would apply its high-end brand, 'Summit Pranity'. The company highlighted that the community facilities, called 'Private Amenity', would include a private cinema and golf practice range, and that Italian wood and kitchen furniture would be used for finishing materials. In addition, unlike Samsung C&T, Daewoo Construction pledged to submit a 'Guaranteed Completion Commitment', promising to complete construction within the agreed timeframe and pay liquidated damages if it fails to do so.

Samsung C&T is promoting its offer of the largest service area per household in Gaepo, at 13.1 pyeong, and a design that provides a 100% open view of Daemosan, Yangjaecheon, and Tancheon. The company also proposed a construction period of 43 months, which is four months shorter than its competitor's offer, promising to reduce the union members' financial burden.

Ma Jonghyuk, president of the Gaepo Woosung 7th Complex union, said, "Currently, the most important factor for the union is whether the contractor can provide a HUG guarantee." He added, "If the 'pre-sale payment' method is used for construction costs, funds may become insufficient after construction costs are paid out, making the union more dependent on the contractor." Regarding project financing interest rates, he explained, "From the union's perspective, we would prefer a clear indication of the CD rate basis, rather than just being told it is the lowest rate available."